CIR v. Ridgeway's Estate

• Citation: 291 F.2d 257
• Decision Date: 01 June 1961
• Docket Number: No. 13401.,13401.
• Parties: COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. ESTATE of Ellis Branson RIDGWAY, Deceased, Craig Sawyer Ridgway and Ellis Branson Ridgway, Jr., Executors, Respondents.
• Court: U.S. Court of Appeals — Third Circuit

291 F.2d 257 (1961)

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. ESTATE of Ellis Branson RIDGWAY, Deceased, Craig Sawyer Ridgway and Ellis Branson Ridgway, Jr., Executors, Respondents.

No. 13401.

United States Court of Appeals Third Circuit.

Argued February 7, 1961.

Decided June 1, 1961.

Loring W. Post, Washington, D. C. (Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson, I. Henry Kutz, Attys., Department of Justice, Washington, D. C., on the brief), for petitioner.

James J. Cloran, Philadelphia, Pa. (Frederick E. S. Morrison, Calvin H. Rankin, Ernest L. Nagy, Drinker, Biddle & Reath, Philadelphia, Pa., on the brief), for respondent.

Before BIGGS, Chief Judge, and STALEY and HASTIE, Circuit Judges.

STALEY, Circuit Judge.

On September 25, 1930, Ellis Branson Ridgway, decedent, executed a deed of trust, the income being payable to his wife for life, and upon her death to decedent, if living, for his life. The trust was irrevocable except for a power he expressly reserved to make changes with respect to the distribution of principal or income, but not so as to favor himself or his estate. The decedent relinquished this power in 1944, thereby surrendering all control over the trust property and making the trust completely irrevocable.

The decedent died in 1953, and the Commissioner included the value of the trust property in the gross estate under the provisions of § 811(c) (1) (B) of the Internal Revenue Code of 1939, which reads as follows:

§ 811. Gross Estate.

"The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated, except real property situated outside of the United States —

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"(c) Transfers in contemplation of, or taking effect at, death

"(1) General Rule. To the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money\'s worth), by trust or otherwise —

* * * * * *

"(B) under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (i) the possession or enjoyment of, or the right to the income from, the property, or (ii) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom * * *.

* * * * * *

"Subparagraph (B) shall not apply to a transfer made before March 4, 1931; nor shall subparagraph (B) apply to a transfer made after March 3, 1931, and before June 7, 1932, unless the property transferred would have been includible in the decedent\'s gross estate by reason of the amendatory language of the joint resolution of March 3, 1931 (46 Stat. 1516)." 26 U.S.C.A. (Int. Rev.Code 1939) § 811(c) (1). (Emphasis supplied.)

The executors, respondents, take the position that the value of the trust property should not be included in the gross estate because of the exception contained in the last sentence of § 811(c) (1) to the general provisions of subparagraph (B). The exception was added by § 7 of the Technical Changes Act of 1949, 63 Stat. 891, 896, as further amended by § 207 of the Technical Changes Act of 1953, 67 Stat. 615, 623. The Commissioner contends that the word "transfer" as used in the exception does not have the same meaning as that word has when used in the general provisions of the subparagraph, i. e., the transfer in trust can come within the exception only where it is completely irrevocable, and that occurred here only upon execution of the 1944 amendment. The Tax Court, and we believe correctly so, agreed with respondents. 1960, 33 T.C. 1000.

This appeal comes down to this: Is a "transfer" which is otherwise taxable under the general provisions of subparagraph (B) relieved of taxation under the exception, provided only that it occurred prior to March 4, 1931? The answer must be yes, unless we give a different meaning to the word "transfer" when used in the exception than we do to that same word when used in the general provisions of the subparagraph.

Where a word or phrase is used in different parts of the same statute, it will be presumed to have the same meaning throughout. Atlantic Cleaners & Dyers, Inc. v. United States, 1932, 286 U.S. 427, 52 S.Ct. 607, 76 L.Ed. 1204; Schooler v. United States, 8 Cir., 1956, 231 F.2d 560. The need for uniformity becomes more imperative where the same word or term is used in different statutory sections that are similar in purpose and content, In re Associated Gas & Electric Co., D.C.N.D.N.Y.1935, 11 F.Supp. 359, or where, as here, a word is used more than once in the same section. E. g., United States v. Gertz, 9 Cir., 1957, 249 F.2d 662 (term "foreign country" in 18 U.S.C. § 489); Hull v. American Wire Weavers' Protective Ass'n, D.C. N.D.Ohio, 1957, 159 F.Supp. 425 (terms "labor organization," "craft," "trade," and "class" in 29 U.S.C.A. § 158(b) (4) (D). In Lewellyn v. Harbison, 3 Cir., 31 F.2d 740, 742, certiorari denied, 1929, 280 U.S. 560, 50 S.Ct. 18, 74 L.Ed. 615, this court construed the phrase "distribution made" to have the same meaning where used in a section of the statute that both imposed a tax and granted an exception to such a tax, and said: "When the same word or phrase is used in the same section of an act more than once, and the meaning is clear as used in one place, it will be construed to have the same meaning in the next place." We certainly would not be faithful to the statutory scheme if we gave the word "transfer" in the general provisions of the subparagraph a different meaning than it has in the exception. See United States v. Olympic Radio & Television, Inc., 1955, 349 U.S. 232, 75 S.Ct. 733, 99 L.Ed. 1024.

The general provisions of subparagraph (B) include a transfer under which the decedent retains the right whether alone or in conjunction with another to designate the person who shall possess or enjoy the property or income therefrom. It is not limited to irrevocable transfers in trust, as the Commissioner insists the exception is. In addition, § 811(d) of the 1939 Code makes a transfer under the general provisions of subparagraph (B) revocable since it is one where the enjoyment thereof is subject at the date of decedent's death to a change through the exercise of a power, either by the decedent alone, or in conjunction with another. At the risk of repetition, we say that the Commissioner's contention cannot be sustained because of the fact that the exception provision expressly refers to transfers within the ambit of the general provisions of subparagraph (B), which admittedly encompasses revocable transfers, and thus the word "transfer" in the exception provision cannot possibly be limited to irrevocable ones. Neither the statute nor its legislative history support the Commissioner.

The Commissioner advances an elaborate argument in which he intertwines judicial decisions with statutory enactments and legislative history. He begins with the decision of the Supreme Court in May v. Heiner, 1930, 281 U.S. 238, 50 S.Ct. 286, 74 L.Ed. 826, which held that retention of a contingent life interest by the settlor of an irrevocable trust until the date of his death did not result in the inclusion of the corpus in the settlor's gross estate because title to the property was fixed by the trust deed, and it was not, therefore, in the settlor's possession at the time of his death. On March 3, 1931, Congress, in response to the May decision passed a joint resolution, 46 Stat. 1516, amending the estate tax law by providing that property transferred subject to life interests reserved in settlor-transferor was includible in a decedent's gross estate. The Supreme Court in Commissioner of Internal Revenue v. Church's Estate, 1949, 335 U.S. 632, 69 S.Ct. 322, 337, 93 L.Ed. 288, overruled May, thereby causing pre-resolution transactions involving a transfer of property subject to life interest to be included in the gross estate. Because of concern over hardships that this change might bring about, Congress in 1949 enacted § 7 of the Technical Changes Act, which provided that § 811(c) (1) (B) would not apply to a "transfer made prior to March 4, 1931." 26 U.S.C.A. § 811 note. The congressional purpose underlying this exception was the protection of decedents who acted in reliance on the May decision as to pre-1931 transactions. The Commissioner contends that the exception provided in the last sentence of § 811(c) (1) is inapplicable to any transfer of property in trust other than one which is identical to that involved in May.

We should not resort to legislative history where, as here, the language of the statute is so clear as to require no construction. Helvering v. City Bank Farmers Trust Co., 1935, 296 U.S. 85, 89, 56 S.Ct. 70, 80 L.Ed. 62; Wilbur v. United States ex rel. Vindicator Consolidated Gold Mining Co., 1931, 284 U.S. 231, 237, 52 S.Ct. 113, 76 L.Ed. 261; United States v. Missouri Pacific R. R. Co., 1929, 278 U.S. 269, 278, 49 S.Ct. 133, 73 L.Ed. 322. Unlike other extrinsic aids to statutory construction, legislative history is to be used to solve and not create ambiguity. United States v....